New traders might avoid investing during times of inflation. However, there are always some options for profit open.
We all hoped that it was starting to go away, but unfortunately we are still very much under the pressure of inflation. US inflation data came out on Friday and revealed that consumer prices are rising more than expected again.
Therefore, it seems like the worst possible time to start investing. Any amateur trader would stay away from this madness and wait for things to improve, right? After all, we are also approaching a possible recession.
Well, the truth is that whoever got rich in times of crisis started when such crises were still occurring. After all, the economy has always experienced crashes and has always been rebuilt afterwards, why should now be different?
Investing now would mean that, once the crisis is over, the benefits of the reconstruction will immediately be felt.
In practice, this means that buying low is better than buying high. Price cannot grow forever, at some point it will eventually stop: therefore it is better to take advantage when it is still down.
However, investing immediately before a crisis is also undoubtedly risky. Not every sector survives a crash, while others take time to come at previous levels. So, what should an amateur investor do?
Where to invest in times of crisis
The market always offers some options for everybody. There are always some safe and secure types of investments that can be done even in times of high inflation.
Of course, they don’t sound as exciting as betting everything on the newest cryptocurrency, but at least they ensure a return on investment.
First and foremost, gold has always been and keeps being one of the safest assets to ever invest in. As a matter of fact, despite high inflation and risks of recession, gold futures seemingly ignore it.
Today gold is trading down at -0.31% while the S&P 500 (an index that measures the richest companies in the US) fell by -1.20%.
Another great way to protect your money against inflation while also investing is to buy state bonds. A “bond” is essentially a loan to the government that will be repaid in the long term.
The “riskier” this repayment is, the higher the interest rates. Of course, returns on long-term bonds for rich nations like the United States offer low interest rates. It is very likely that the United States will pay back its debt and not default.
Another good investment for beginners in times of inflation might be index funds. An index fund is a stock that tracks the prices of indexes, like the aforementioned S&P 500.
Because investing in an index fund basically means investing in every stock of that index, it’s much safer than investing on a single stock every time. By investing in an index fund, some companies might go down in price but the overall index might go up, therefore generating a profit.